1.     You deposit $5000 in the bank for one year. CASE 1: inflation = 0%, nom. interest rate = 20% CASE 2: inflation = 10%, nom. interest rate = 30% a.     In which case does the real value of your deposit grow the most?  Assume the tax rate is 15%.  b.     In which case do you pay the most taxes? c.     Compute the after-tax nominal interest rate, then subtract off inflation to get the after-tax real interest rate for both cases.

7. Suppose that people expect inflation to equal 3%, but in fact, prices rise by 5%. Describe how this unexpectedly high inflation rate would help or hurt the following: A.) the governmentB.) a homeowner with a fixed-rate mortgageC.) a union worker in the second year of a labor contractD.) a college that has invested some of its endowment in government bonds

The rate of inflation in Zimbabwe rose in 2018 from 10.6% to 577.21% in 2020. What was the positive effect of this unexpected inflation on the residents of the country? O It helped debtors It helped creditors ) Helped those people on fixed incomes None because everybody is hurt by inflation

Interest rates can be expressed in real or nominal terms. Which of the following is most correct?   a.Because market rates are usually in nominal terms, cash flows will usually be in inflation-adjusted terms.   b.Market rates are only meaningful in nominal terms, because an accurate adjustment for inflation is not possible.   c.Real interest rates can be calculated as the difference between nominal rates and the inflation rate.   d.Market rates are always expressed in real terms, because it is important that inflation be included in financial assessment.